Analysis: Mercosur–EU deal points to deeper integration but uncertain development gains

The trade agreement between Mercosur and the European Union represents one of the most significant developments in today’s global commerce, not only because of its economic scale but also for its political and geopolitical weight. After more than 25 years of negotiations, the recent progress on the deal comes amid a global environment marked by fragmented supply chains and a resurgence of protectionism, driven by the return of unilateral trade practices. Together, the two blocs encompass 31 countries, more than 700 million people and account for nearly 25% of global gross domestic product.

In simplified terms, the agreement provides for the gradual reduction or elimination of import and export tariffs on products in which each bloc holds greater specialization, whether due to technological capabilities or comparative advantages linked to their respective regions. It also establishes common rules on issues such as trade in industrial and agricultural goods, investment and regulatory standards. In practice, Mercosur will eliminate tariffs on around 91% of European goods over up to 15 years, while the European Union will remove tariffs on roughly 95% of Mercosur-origin goods within up to 12 years, indicating a high degree of trade liberalization between the parties.

On Jan. 9, the European Commission approved the text with the backing of 21 of the EU’s 27 member states, enough to meet the required quorum both in number of countries and population representation, which must reach at least 65% of the EU population. With that, Commission President Ursula von der Leyen is authorized to sign the agreement, which is expected to happen later in January.

The process, however, is far from complete. On the European side, the deal still needs approval from the European Parliament, a step expected in the coming months, likely between April and May. Within Mercosur, the agreement will only enter into force after ratification by the national congresses of Brazil, Argentina, Paraguay and Uruguay, adding a significant and potentially uneven domestic political dimension. Bolivia is not yet a full member but is in the process of accession, while Venezuela has been suspended from the bloc since 2016 over democratic concerns.

Although the agreement goes beyond agribusiness, that sector was the most sensitive issue throughout the negotiations. The text provides for the elimination of import tariffs on 77% of agricultural products exported by Mercosur to the EU, with transition periods ranging from four to 10 years. Products considered sensitive by Europeans, such as poultry, pork, sugar, ethanol, rice, honey and corn, will be subject to export quotas, as they compete directly with local production. These quotas function as a mechanism of controlled liberalization, keeping tariffs in place above the established volumes and preventing immediate and unrestricted access to the European market. In total, about 82% of Mercosur agricultural exports will benefit from tariff reductions.

The agreement also recognizes around 350 geographical indications aimed at preventing the imitation of certain traditional EU food products. As a result, names such as Parmigiano Reggiano (Parmesan cheese), Prosciutto di Parma, Champagne, Bordeaux wines and French cheeses like Roquefort and Camembert will be reserved exclusively for products made in their respective regions.

In addition, the deal incorporates safeguard mechanisms that allow the EU to temporarily suspend tariff benefits in the event of a significant impact on its domestic market. In practice, if imports of a given sensitive agricultural product rise by more than 5% on a three-year average, the EU may launch an investigation and assess the suspension of benefits. For Mercosur countries, these clauses are a point of concern, as they introduce additional uncertainty over the predictability of access to the European market and underscore the regulatory power asymmetry between the blocs.

From a South American perspective, a recurring and relevant criticism is that the agreement still reflects a structural “Global North versus Global South” logic. Mercosur remains largely positioned as an exporter of agricultural commodities such as soybeans, coffee and meat, while the EU expands access for higher value-added industrial products, including automobiles, pharmaceuticals, machinery, chemicals, chocolates, cheeses and wines. Added to this is concern over stringent environmental and regulatory requirements, which may impose additional adaptation costs on Mercosur producers, especially small and medium-sized companies.

The agreement also advances provisions on trade in services and investment by reducing regulatory discrimination against foreign investors and expanding commitments in sectors such as financial services, telecommunications, transport and business services. While this chapter has the potential to deepen productive integration and increase regulatory predictability, its concrete effects will depend on Mercosur countries’ ability to turn formal openness into effective competitive integration.

Another relevant point is the opening of public procurement markets, allowing Mercosur companies to participate in EU tenders under more transparent and predictable rules. This represents an important institutional advance, but one whose practical use will require a high level of technical and organizational capacity from South American firms.

On environmental issues, the clauses are binding, conditioning tariff benefits on compliance with environmental commitments, including a ban on the commercialization of products linked to illegal deforestation and the possibility of suspending the agreement in the event of violations of the Paris Agreement. While this framework responds to legitimate sustainability demands, it also reinforces the use of environmental requirements as an instrument of trade policy.

Sanitary and phytosanitary rules remain strict, with no relaxation on the EU side, preserving significant technical barriers. This requires continuous investment in regulatory compliance by Mercosur exporters.

The agreement’s advance also comes at a time of heightened tension in global trade. The recent increase in tariffs imposed by the United States, known as the “tariff shock,” has also affected the EU and was a key factor in countries such as Germany and Spain shifting to support the deal, despite opposition led by France. In France’s case, resistance is closely tied to pressure from the agricultural sector and the political fragility of a minority government.

To unlock negotiations, the EU strengthened safeguards for its agricultural sector and signaled tariff reductions on fertilizers, lowering production costs for local farmers. For both sides, the agreement offers an opportunity to diversify trade partners, expand industrial exports and reduce dependence on China in strategic supply chains, particularly in the minerals sector.

For Brazil, Mercosur’s largest economy, the treaty broadens access to a market of around 451 million consumers and is likely to generate impacts that go beyond agribusiness, reaching key industrial segments and stimulating bilateral investment.

In an increasingly fragmented global environment, the agreement signals a bet on multilateralism and economic integration as tools for stability and growth. From an analytical standpoint, while potential economic gains are significant for both blocs, the effective distribution of those benefits will depend on Mercosur countries’ ability, especially Brazil’s, to formulate non-protectionist industrial and trade policies capable of avoiding the perpetuation of asymmetries, reducing commodity dependence and promoting greater value addition over the long term.

By Nailia Aguado Ribeiro Franco, corporate lawyer at Andersen Ballão Advocacia.
Text provided by a press office.

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